One of the best parts of fighting games....
Mind games are manifested in the mutual actions of players. Things from baiting attacks or throws, programming pseudo-Pavlovian responses then changing the strategy for massive damage... even basic mixup counts as part of mind games.
The deeper a game is and the more advanced the players are, the more necessary mind games become to playing the game well, even down to which normal move response is going to be more effective than the opponent’s normal move choices.
The true scope of mind games goes beyond what I, or anyone for that matter, can wholly enumerate in writing. You can only learn it by contemplating for yourself when you play or watch others do so. It doesn’t just apply to action or sports, either; it’s an appropriate level of aggressiveness that comes with any moderately competitive action (such as business! or Arson! Weddings! Art! Plagiarism! Handshakes! Well, maybe not handshakes).
This is not to say that you should be trying it at any and all points you get the opportunity, but some people do (this is called “sociopathy”, and I can’t say I recommend it). But within the context of competition, there is nothing wrong with it.